An anonymous trading system is known, for example, in EP-A-0,399,850, EP-A-0,406,026 and EP-A-0,411,748 which disclose an automated matching system for anonymous trading of foreign currencies (or other financial instruments). In this system, a single host computer maintains a central database of all trading instruments available for trade, credit information and bids and offers which have been submitted by terminals connected to the host via a computer network. The host computer uses information in its central database to match bids and offers and buy and sell orders based on matching criteria which include a counter party credit limit.
The counter party credit limits are set at each trading floor, and are stored at the host computer, which then establishes a gross counter party credit limit for each possible pair of counter-parties. The gross counter party credit limit is the minimum amount of the remaining credit from a first party to a second party, and the second party to the first party. The various trader terminals connected to the host computer maintain and display only a restricted subset of the information available at the host computer, such as best bids and offers.
A problem was identified with this system in that the host computer only used the credit information to check that a deal could proceed after a potential match had been identified. A trader thus could not know whether he had credit with a potential counter party prior to attempting to trade. This problem was identified and a solution provided in the system disclosed in U.S. Pat. No. 5,375,055.
In the system disclosed in U.S. Pat. No. 5,375,055 a credit matrix is derived and stored at a plurality of regional nodes of a distributed network, with each regional node distributing market information to a set of trader terminals to which the regional node is connected via an access node. The regional node is known as a Market Distributor and provides dealable price information to the trader terminals connected via the access node known as a Market Access Node. The actual matching of bids, offers, buy and sell commands is provided by separate nodes known as Arbitrators.
We have further appreciated, however, that there are problems with having a single matching computer. Traders using a host computer trading system are often in geographically separate locations which leads to varying delays in message flow from the traders to the host computer. The result is that a trader in one geographical location may be disadvantaged in terms of the time delay of messages to the host in comparison to another trader. As an example, if two traders in physically separate locations simultaneously submit an order, the trader's message which arrives at the host computer first will match with a quote before the second. This can provide an advantage to the trader geographically close to the host, and is frustrating for the trader further away. Moreover, the trader further away may receive a message reporting that a match has not succeeded, increasing message traffic on the network.
To improve this situation, the more distributed system disclosed in U.S. Pat. No. 5,375,055 has matching engines at separate physical locations, thereby increasing parity between traders in different locations and reducing network traffic. In that system, as with the host system, a trader hitting a price (a taker) could be physically distant from the trader quoting the price (the maker). Whilst network traffic is reduced, there is still the possibility that two traders could hit a price near simultaneously, but that one taker trader will ultimately fail to make a deal with a particular maker because the message from the other taker trader arrived first.
We have appreciated that a distributed system can advantageously be arranged to increase matching.